Big Apple Battles Big Drinks

We hope that the sugary-drink size limit will help reacquaint New Yorkers with more human-sized portions.”That’s the New York City Department of Health keeping its guard up on efforts—led by Mayor Michael Bloomberg—to ban the sale of sugary beverages larger than 16 ounces in the city, even after a New York State Supreme Court justice rejected the proposal.

“Portion sizes of sugary drinks have grown dramatically, and studies show people consume more when given larger portions, often without even realizing it,” Department of Health assistant press secretary Veronica Lewin told CSP. “This rule is intended to decrease the consumption of sugary drinks, which have been linked to obesity, diabetes and heart disease.”

Judge Milton Tingling disagreed, at least about the process. He halted the law just one day before it would become active, calling the rule “arbitrary and capricious.” He also found parts of the New York City Charter “unconstitutional and in violation of the separation of powers doctrine.” In his 36-page ruling, Tingling provides a history-lessonworthy walk through the structure of the NYC government, going back as far as 1686.

But more than anything, Judge Tingling found multiple loopholes in fairness to retailers and even the ability to achieve the stated goal: to decrease the consumption of sugary drinks.

Tingling cited “uneven enforcement even within a particular city block “and ambiguities that “effectively defeat the stated purpose of the rule.” These include a lack of inclusion for all food establishments; exclusion of some beverages, such as milkshakes, “that have significantly higher concentrations of sugar sweeteners”; and no limit on refills or purchasing more than one beverage at a time.

Still, as this story goes to press, Bloomberg and his staff are awaiting a court date for an appeal of Tingling’s March 10 ruling. With that hearing expected in June and Bloomberg’s term as mayor ending in November, New York can likely expect to see a flurry of activity on the subject of the soda ban in coming weeks and months. Here, CSP examines the key issues in the battle, the possible results and what they could mean to retailers in New York and beyond.

Just How Arbitrary?

Among the key points in the lawsuit that prevented implementation of the soda ban: It didn’t apply to all beverage retailers, didn’t encompass all sugar sweetened beverages and left too many loopholes.

“You could have on the same block two seemingly identical stores that sell 99% of the same products,” Chris Gindlesperger, spokesperson for the American Beverage Association (ABA),told CSP. “Just one [of those stores] is able to sell a 20-ounce bottle and another not, based on how much they have in food sales. That’s inequitable.”

The ABA was one of seven associations in October to jointly file a lawsuit challenging the new law.

The ban, as presented by Bloomberg and approved unchanged by the Department of Health, would have affected restaurants, bars, bowling alleys, movie theaters and sports venues. Some dubbed it “the Big Gulp ban” after “the famous or infamous,” according to the court ruling, more-than-32-ounce fountain drinks sold by 7-Eleven, but the proposal ironically did not include 7- Eleven and convenience stores or grocery stores.

This so-called “7-Eleven exemption “appeared to be a tip of the hat to the lobbying force of the largest convenience store chain in the country and the industry as a whole.

It wasn’t. Rather, 7-Eleven was never within the purview of NYC regulations, instead overseen on the state level based on the percentage of food sales in its stores. Still, 7-Eleven representatives understood the ban could hurt the company in the long run.

“While the ruling does not specifically apply to 7-Eleven and convenience stores in general, we view this as a first step-down a slippery slope of unnecessary, unwanted and unwarranted government intervention in the choices people make about their intake of foods and beverages, “said Bruce Maples, chairman of the National Coalition of Associations of 7-Eleven Franchisees, in a release in September.“Our national coalition supports the National Restaurant Association [also a plaintiff in the ABA lawsuit] and other organizations and associations who have raised their voices in opposition to this.”

Meanwhile, Joe DePinto, CEO of 7-Eleven Inc., mildly mocked the proposed regulation while also offering a warning during an April appearance at CSP’s Restaurant Leadership Conference.

“How about you can’t carry a 32-ounce soda in your store? We’ve seen it [tried],”he said. “There’s more of that coming.”

A couple of other cities—Washington, D.C., and Cambridge, Mass.—have discussed a soda size ban, but not to the point of writing up a proposal. And Bloomberg did make a small effort to include convenience stores in his ban, asking New York Gov. Andrew Cuomoin February to consider a similar soda size ban statewide.

“It was off the cuff in a press conference, “says ABA’s Gindlesperger. “And in the same 24-hour cycle, the governor said that he had no interest in doing that.”That doesn’t surprise Fran Duskiewiczof Nice N Easy Grocery Shoppes in upstate New York.

“I don’t think Andrew Cuomo is stupid enough to take the nonsense that happens in New York City and try to spread it across the state,” says Duskiewicz, the chain’s senior executive vice president.

That rationale was enough to keep Duskiewicz from dwelling too much on the possibility of a ban, but what if?“The biggest damage is going to be in the 20-ounce Cokes and Pepsis and Mountain Dews. That would be a problem,” he says, but he couldn’t offer any details on how big a problem.

The week before the ban was expected to go into effect, NYC retailers and restaurateurs were still considering how much it would hurt them and their options. Brother Jimmy’s BBQ CEO Josh Lebowitztold The Wall Street Journal that 1,000 new glasses were ordered for soft drinks at his five New York locations. The restaurants historically serve soda in 24-ounce glasses.

“All of our sodas were in large glasses; it just seemed appropriate. We tend to serve everything oversized,” Lebowitz told the newspaper. “I never thought this would-be legislated.”

Russell Levinson, general manager of Movieworld, said the independent theater was working with its fountain soda distributor, Coca-Cola, to figure out how to comply. The movie house was smarting at the cost and inconvenience.

“Almost all of our sizes, including the bottles that we sell, are at least 20-ounce, “he told the newspaper.

He considered offering a deal for customers who want to buy two of the smaller-size sodas—a legal way to circumvent the ban—but never did hammer out the details.

Let Freedom Ring

The cost of lost sales and new cups aside, Duskiewicz and others also focus on the loss of freedom represented by the proposed ban.

“Mayor Bloomberg is probably well intentioned,but the road to hell is paved with good intentions,” Duskiewicz says.“You can’t treat U.S. citizens like they’re children. … If you can’t trust citizens of New York to buy soda responsibly, how can you trust them to do the really difficult things, like voting or acting responsibly with weapons or caring for children? That’s the scary thing about what he does.… Why is that any of [his] business?”

7-Eleven franchisee leader Maples said, “Individuals have sufficient information to help them make informed and educated decisions about their caloric intake, and this is one more step down a path in which government wants to decide what is best for you—and it won’t end here.”

Acknowledging the Problem

Retailers and others involved aren’t dismissive of the problem Bloomberg is trying to resolve, however. They acknowledge obesity is a problem in New York City and across the United States.

Nearly 60% of New York City adults and 40% of public elementary-school children are overweight or obese, according to the NYC Department of Health. One in eight adult New Yorkers now has type-2 diabetes. Obesity-related illness kills more than 5,000 New Yorkers each year.“We recognize that America has an obesity challenge,” Maples says. “Our family of 7-Eleven franchisees and their employees continue to provide healthy options and choices for our guests, allowing them to make their own informed decisions, which address their desires and needs in a market-driven fashion. We believe this is the optimal way for small businesses and consumers to address this issue.”

The major soda manufacturers all agree, supporting the ABA in its campaign against the New York soda ban. All three manufacturers declined comment for this story, preferring to have the ABAspeak on their behalf.

In October, however, when discussion of the ban was at full tilt, Mel Landis, Coca-Cola Refreshments chief customer officer, told CSP, “We believe obesity is a big problem. What we also believe, though, is there are good ways to get after obesity and there are ways that are not effective. We don’t believe regulation, unfair taxes, bans on things are a great way to get after it.”

As an alternative, Atlanta-based Coca-Cola and other major beverage manufacturers have teamed with the cities of Chicago and San Antonio on anti-obesity programs that ideally could prevent a beverage ban or new tax.

“We’re partnering with [these cities]to figure out ways to get better education and to get people more active,” Landis said. “We’re going to get better education in these particular cities by expanding front-of-pack labeling to now include our vending machines.”

Coca-Cola; PepsiCo, Purchase, N.Y.; and Dr Pepper Snapple Group, Plano, Texas, worked together with the ABA to develop the vending initiative and the city efforts. In the city program, Chicago will compete against the city workers from San Antonio for a $5 million grant from the ABA to see which workforce is healthier. The nationwide soda-lobbying group will also pay $1,000 to individual workers who meet health-care goals.

“We [the beverage industry] have a very strong leadership platform that we’re very proud of,” says ABA’s Chris Gindlesperger.“We went marketwise to label all of our products with the full calorie count right on the front of the can or bottle so you know exactly how many calories are in the package that you’re picking up.

“There are ways to go about educating and bringing the calorie awareness to the forefront for consumers without implementing a tax or ban.

“The one area where we do agree, “he continues, “is that there is a real issue. We’re not trying to pull the wool over anybody’s eyes. We recognize that we make products with calories in them, and that’s why we’re doing the responsible thing to empower consumers and educate them on what’s in our product.